Unravelling started on Cascade’s books

A query from a single private investor with a small shareholding in
White Energy
may have brought down the proposed $500 million takeover of Cascade Coal.

The investor, a professional engineer who does not wish to be named, told the Weekend Financial Review he emailed the ASX to question various disclosures in independent expert reports for the transaction in early March 2011.

Perhaps his biggest concern at the time was that White Energy was overpaying for Cascade, but one query was about a mysterious item on the Cascade balance sheet.

Cascade had paid only $1 million for the Mt Penny project and spent a few million more on exploration, yet there were capitalised mining costs of $41.7 million listed in its accounts.

Ten days later, the ASX sent a letter to White Energy reflecting the investor’s concerns, including the mysterious balance sheet item.

White Energy responded on March 21, saying: “The capitalised mining costs relate to the carrying value of the acquisition, rights and other mining costs related to the mining sites."

By April 11, there may have been more queries. On a taped phone conversation with fellow White Energy director and Cascade investor John Kinghorn, Travers Duncan said the corporate regulator was also making inquiries.

Duncan says White Energy couldn’t answer the questions without disclosing that $30 million was paid to Cascade director
Richard Poole
and his family. In turn, the inquiry has heard those funds were funnelled to former NSW minister
Eddie Obeid
and his associates.

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In the phone call, Duncan told Kinghorn, “we tried all sorts of weasel words and everything" in a likely reference to the previous response to the ASX.

Duncan adds
Graham Cubbin
, the director in charge of White Energy’s independent committee, was aware of the queries and “extremely nervous".

Duncan told the inquiry of Cubbin yesterday: “I think he was not satisfied with the answer that had been given to the ASX about the questions they asked."

The next morning, in an ASX announcement, White Energy said it had agreed with Cascade for the “mutual termination" of the transaction. White Energy blamed “significant comment in the local area on the effects of mining on the Bylong Valley".

But Duncan told the ICAC inquiry yesterday the deal was dropped due to White Energy’s falling share price and Cubbin’s nervousness, without mentioning community opposition.

That raises questions over whether White Energy – where Duncan and Kinghorn remain on the board with Cubbin – made proper disclosures to the market.